Rise of the car-sharing apps poses threat to auto sector
Rise of the car-sharing apps poses threat to auto sector
By Atul Prakash and Sudip Kar-Gupta
6 hours ago
LONDON (Reuters) - The humble smartphone could throw a
spanner in the works of the car sector's post-crisis turnaround, with the big
manufacturers facing a long-term threat from apps that make it easier and
cheaper to share or hire vehicles than to buy them.
Investor sentiment is on a knife edge. Car sales are back
in recovery mode in most major European markets, yet the fragility of the
turnaround could yet be exposed by another economic slowdown while investors
have flagged the potential danger posed by web-based services further down the
road.
The rise of the likes of car hire app Zipcar and
car-pooling rival BlaBlaCar are expected to present new challenges to
mass-market carmakers such as Ford, GM, Volvo, Renault and Volkswagen while
presenting fresh opportunities for existing rental networks.
Online taxi business Uber is another seeking a slice of
the market with its UberPop operation, which links private drivers to
passengers, though the U.S. company faces legal challenges in countries
including France and Germany.
Cathie Wood, chief executive of ARK Investment
Management, is among the growing band of investment professionals expecting a
significant behavioral shift among the car-buying public.
"Thanks to web-enabled services like Zipcar, Uber
and Lyft, household vehicles are beginning to feel like the stranded assets
they are: high in cost but utilized on average only 4 percent of the time in a
24-hour day," she said.
The realization of such by consumers could eventually
prove costly for carmakers. Specialist automotive consulting house AlixPartners
says that every vehicle in a car-sharing network represents about 32 scrapped
decisions to buy.
HEAVY BACKING
ARK Investment Management, meanwhile, says that a rise in
car-sharing to 5 percent of all journeys could almost halve U.S. auto sales.
At this early stage, the projections remain a little
nebulous and like-for-like comparisons between auto sales and car-share figures
are particularly difficult. But it is clear a trend is gathering momentum and
there appears to be no shortage of backers keen to tap the austerity zeitgeist.
French billionaire Vincent Bollore unveiled plans to park
3,000 electric cars on London’s streets by 2016 as part of a car-sharing
project announced in March. The Bollore group, which also operates car clubs in
the French cities of Lyon and Bordeaux, said it would invest 100 million pounds
($157 million) on the UK initiative.
At a global level, the trend has the potential to slow
automakers’ annual revenue growth to less than 2.5 percent from 3 percent
between 2014 and 2020, according to Yasmina Barin, analyst at Swiss bank and
fund management group SYZ.
The initial outlay for a vehicle and running costs that
have soared for young drivers because of elevated insurance premiums are
another factor in the growth of car-sharing or rental apps.
Uber’s latest funding round valued the company at $40
billion, broadly equivalent to the combined market capitalization of Peugeot,
Fiat Chrysler and Volvo.
Gary Paulin, head of brokerage firm Aviate Global, said
the trend would also benefit car hire companies such as Avis Budget Group and
Hertz but could be more challenging for the traditional carmakers.
"The big listed auto makers will need to
adapt," he said.
The market's potential has certainly not been lost on
Avis, which runs the Zipcar scheme that says it has more than 870,000 members
in various locations around the world and in October launched operations in
Madrid.
Hertz, meanwhile, has expanded its 24/7 car rental
service to Europe and expects the number of vehicles included in the service to
rise to about 500,000 by 2016, from 35,000 today.
ON THE BANDWAGON
Among the manufacturers, some have been quicker to
respond than others.
BMW became the latest entrant in London with this month's
launch of its DriveNow car-sharing service in partnership with rental firm
Sixt. The scheme is already up and running in the United States, Austria and
Germany.
Volkswagen's Quicar is present in Hanover, while Daimler's
car2go operates in cities including Rome and Berlin, running 12,500 cars for a
million customers.
SYZ analyst Barin believes that carmakers could still
cope with the car-sharing phenomenon because the smaller cars used in such
schemes might have to be replaced quickly and manufacturers could focus on
producing such vehicles.
Yet for all their efforts to limit sales erosion, the
manufacturers are likely to be left competing in a shrinking overall car market
as a new breed of driver emerges.
"I thought about buying a car," 28-year-old
London-based PR executive Claire Rumbellow said, "but decided it would be
cheaper and more practical to use a car-sharing scheme because I use a car only
once a week at most.
($1 = 0.6389 pounds)
(Editing by Lionel Laurent and David Goodman)
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